Playing the Contract Game

Sam Rush looks at the issues involved in the drafting of a tripartite players' contract between the RFU, the clubs and its players.

In recent times rugby union has suffered from any number of false dawns that have had the cumulative effect of stunting its progress as a professional sport. For the players, August 1, 1998 was to be the date, under the terms of the Mayfair Agreement, when the new standard players' contract would be published. The hitherto uneasy relationship between players, clubs and unions would be cured with a document representing the requirements of all sides.

With all the uncertainty in the sport it is no surprise that to date such an agreement has not yet been produced, but as various blueprints for the future structure of rugby union move closer to enactment it will probably not be long before the issue of players' contracts is resolved. In 1997/98, when discussions were originally held, contracts needed to reflect the unique circumstances surrounding the transition from the amateur to the professional game, but 2000 going forward is quite different.

Clauses such as fitness maintenance, attendance at training and abstinence from conflicting sports, although still essential in new contracts, are now merely standard terms and to be expected in agreements between professionals at the peak of the sport. However, it is the sophisticated issues of structuring remuneration, licensing and promotional activities and agreeing termination provisions that are likely to prove crucial in the new era.

In the first part of this review I will take a look at the 'bread and butter' issues of remuneration, benefits, duration and termination of a contract. In the second part I shall discuss image rights, promotional activities, exclusivity and media-related activities.

Structuring remuneration

Naturally, remuneration remains the dominant contractual issue with the complex job of balancing the requirements of the club and the player. For the club, tied by the tight financial constraints of modern rugby union, a remuneration package geared towards payment for performance would be ideal.

A potential structure would involve a base salary, but significant revenue to be derived from appearances, win bonuses and a successful team. In this way, clubs are able to use an incentive to boost players' performances and limit the amount they payout to an unsuccessful side. A player, on the other hand, will be reluctant to sign up to uncertainty and would wish the majority of his money to be guaranteed with additional income to be gained from winning games, titles and perhaps scoring tries or points.

Clubs will also have to agree on their internal pay structure and how they wish to differentiate between differing levels of seniority within their club or the attainment of international honours. Further, they will have to decide how they will address the issue of signing-on fees - given the volatility surrounding the sport, players may well be keen to receive as much of their base salary as possible on signature - and so-called 'loyalty payments' which ensure that players receive a lump-sum payment for seeing out the term of their contract.

Benefits

The additional benefits included in a contract can often be a 'sweetener' provided by a club to counterbalance the perceived lack of base remuneration to the player. An increasing number of clubs own properties near their ground which can be offered to players as a benefit, but which also have the added advantage of ensuring that they are located within the community.

Equally, the provision of a club car is expected, but each party will need to be aware of their responsibilities. The player will want the club to cover the majority of the costs of its upkeep, but the clubs will want protection against any potential misdemeanours. With the changing corporate structure of clubs, there is now the opportunity to offer shares rather than cash, with the incentive that a successful season and its connected spin-offs are likely to lead to an increase in the worth of the stock.

Duration and termination

For both player and club, agreeing on the term of the relationship is a gamble. Clubs want to ensure they have the player on their books for long enough to exploit his potential and avoid losing an individual in his prime, but they do not want to continue paying a player who is unlikely to make a contribution to the team.

Meanwhile, a player must ensure that he is guaranteed to earn a living for a lengthy period of time and be protected against loss of form and injury, but he does not want to be tied to a team where either his first-team opportunities are limited and he has the chance of playing elsewhere, or the team is unsuccessful and superior clubs are keen to enlist his talents.

Incorporating additional termination provisions in an agreement may prove the solution to this conundrum, but that can also be risky. For players, it may not be wise to provide their club with the opportunity to release them during the duration of their contract and for clubs they are likely to resist any attempt from their players to escape before time, although in some circumstances they may consent to a provision allowing a player to leave if the club is relegated from their current league.

However, traditional termination provisions should be included in any contract and the clubs will want to have the power to dismiss a player for gross misconduct and fundamental breach. In the case of fundamental breach, the club may have a choice as to how it wishes to proceed. It could either terminate the contract with immediate effect or, if there is a fundamental breach by a player wishing to transfer to another club without the consent of his current employer, they could still play the player but refuse to assign any duties to him. Given the current playing field, the player will want the opportunity to terminate the agreement should the club become bankrupt or fall into receivership.